G-20 nations have agreed to develop principles to regulate the banking sector and to make 100 billion US dollars in loans available to the International Monetary Fund to support the developing world according to British government sources.
European leaders gathered at a summit in Brussels to discuss their stance on solving the global economic crisis ahead of next month’s G20 Summit in London.
Speaking after the summit, Britain’s Primer Minister Gordon Brown said the EU has also agreed a 5 billion Euros package of funding for renewable energy and broadband projects to make Europe’s economic recovery “green and high tech”.
Leaders have also pledged to double the balance of payments assistance that may be made available to struggling central and Eastern European countries to 50 billion Euros.
“This is an issue for every country in the world. It is vital, therefore, that we increase resources available to the international institutions to stop the crisis spreading” said PM Brown.
He emphasized that the 100 billion US dollars loan will not be given to the IMF immediately, but countries have agreed they will supply the funds if necessary. He said the UK will now consider how much its contribution would be.
Brown said the EU has taken an anti-protectionist stance that it will carry into the G20 negotiations - a theme that had been central to the Prime Minister’s discussions this week.
“We reject protectionism. We are an anti-protectionist European Union. We must remain vigilant at all times to any form of protectionism - covert or overt”, said the British Prime Minister.
He said that Friday’s agreements had “laid the foundations” for the G20 summit and revealed that next week he will travel to New York, Brazil and Chile to continue discussions on the economy in the hope of building more international consensus ahead of the G20.
The principles to regulate the banking sector were anticipated on Thursday by Lord Turner who is the head of the UK's Financial Services Authority (FSA).
The recommendations include: a system-wide approach to financial stability, emphasising 'macro-prudential' tools; all financial institutions to be subject to regulation if they might cause risks; regular meetings of the IMF and Financial Stability Forum to assess global risks; requiring banks to build up of capital reserves in good times to act as a buffer in bad times; requiring banks to hold more liquidity (cash) buffers; Government oversight of bankers' compensation schemes to ensure they do not increase risks and oversight of credit rating agencies.